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7/31/2019 NSE Circular - Algo2
http://slidepdf.com/reader/full/nse-circular-algo2 1/8
7/31/2019 NSE Circular - Algo2
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Members desirous of seeking approval for ‘Non-approved Algorithms’ shall make an application to the
Exchange. The format of the Application is enclosed (Annexure A).
The Member shall be required to give demonstration of the automated Risk Management features for
each Decision Support Tool / Algorithmic trading product. On verification of the documents and
fulfillment of the conditions as satisfactory and meeting SEBI / Exchange minimum requirements, theExchange shall grant permission to the member for the usage of ‘Non-Approved Algorithms’ through
CTCL. Subsequently, the member shall be required to inform the Exchange in case of any changes to
the version number or risk management features of the Decision Support Tool / Algorithmic tradingproduct.
c) DMA algorithms – Trading Member / Institutional Client algorithms
This procedure will be applicable for granting approval to trading member for DMA algorithms –Trading member or institutional client algorithms. These algorithms may be in-house developed by
member, vendor supplied or institutional client proprietary algorithms.
Members desirous of seeking approval of algorithms through Direct Market Access facility as approvedby the Exchange shall make an application to the Exchange. The format of the Application is enclosed
(Annexure A). On verification of the documents and fulfillment of the conditions as satisfactory and
meeting SEBI / Exchange minimum requirements, the Exchange shall grant permission to the memberfor the usage of ‘Approved Algorithms’ through CTCL.
2. Procedure for Identification of Decision Support Tools / Algorithms as ‘Approved Algorithm’
Vendors offering Decision Support Tools / Algorithmic trading products to trading members anddesirous of having their Decision Support Tools / Algorithmic trading products identified as
‘Approved Algorithms’ shall apply to the Exchange. The format of the Application is enclosed
(Annexure B).
On fulfillment of the conditions as satisfactory and meeting SEBI / Exchange minimum requirements,
the Exchange may identify the vendor’s Decision Support Tools / Algorithmic trading product as‘Approved Algorithm’. The Exchange may request for any additional information as it deems fit.
3. Additional category of Non- Neat User:
Members using Non- Neat Front End have represented to provide a separate user in addition to currentcategories without a NEAT login facility. The rationale behind this requirement was that such user id is
used only for control and validation and not for trading.
Hence, Exchange proposes to provide a separate category of Non-Neat user without NEAT login
facility along with the current categories of users. Members are requested to note that such category of user shall not be allowed to login/ trade through NEAT/NEAT Plus. Members will be required to build
additional back up facilities for exigency. This category of user will not be required to provide any
certification as the user does not have trading eligibility by itself.
The procedure for requesting such user ids will be provided separately.
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4. Risk Managers for Algorithmic Terminals:
Pursuant to representation from trading members, it is proposed that, each risk manager shall be
allowed to manage multiple algorithms under a single risk management system. Hence it would beconsidered as single dealer for the compliance purpose.
For National Stock Exchange of India Limited
Suprabhat Lala
Vice President
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Annexure A
Application form for permission for providing Decision Support Tools / Algorithms trading(To be executed on letterhead of the Member)
We/I, _________________ having my/our Registered Office/Office at _________ am/are tradingmember/s of the Capital Market segment / Futures and Options segment / Currency Derivatives
segment of the National Stock Exchange of India Limited; hereby apply for the permission of the
Exchange for providing Decision Support Tools / Algorithms trading.
S
No.
Particulars Details
1 Name of the Trading Member :
2 SEBI Registration number :
3 Registered Office/ Office address :
Telephone :Fax No. :
4 Name of the Authorised Signatory andDesignation
5 Contact address of the AuthorisedSignatory :
Telephone No. :
Fax No. :
6 Approval for • ‘Approved Algorithm through
CTCL’
• ‘Non-approved Algorithm through
CTCL’
• ‘DMA Algorithms – Trading
Member or Institutional Client
Algorithms’
7 Type of algorithm • Execution Algorithm
• Arbitrage Algorithm
• Alpha seeking Algorithm
• High Frequency Trading
• Others
8 Whether the software providing
Decision Support Tools / Algorithmstrading is being developed by themember on his own
YES / NO
9 If not, name of software vendordeveloping Software
10 Strategy Name and Version number
11 Complete address of server routingAlgorithm orders to the Exchange
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trading system.
12 Confirmation letter from the vendor
supplying the Decision Support Tool / Algorithmic trading product is attached
(Applicable only in case of ‘Approved
Algorithm through CTCL’)
YES / NO
13 Details regarding the vendor who has
developed the CTCL / adapter andautomated risk management system
using which the Decision Support Tools
/ Algorithmic trading product shallconnect to the Exchange Trading
system (Applicable only in case of
‘Non-approved Algorithm through
CTCL’)
14. Details of approved Direct MarketAccess (DMA) using which the
algorithm orders shall be released to theExchange
DMA Application Name :Version number :
DMA Approval Date :
(Applicable only in case of ‘DMAAlgorithms’)
15 Trading Member / Institutional client
Algorithms (Applicable only in case of
‘DMA Algorithms’)
Trading Member / Institutional client
Algorithms
16 Name of Institutional client (Applicable
only in case of DMA Algorithm -Institutional client Algorithms)
We confirm and certify that the software for Decision Support Tools / Algorithms trading has
undergone tests by us and are satisfied and we undertake to comply with and be bound by the Rules,
Bye-laws, Regulations of the Exchange, SEBI, RBI and any other statutory and regulatory body(ies) as
may be applicable from time to time.
We certify that all the statements are true and correct to the best of our knowledge. We are aware that
in case any of the statements are found to be incorrect or false, we are liable for disciplinary action.
We understand that the Exchange reserves the right to call for additional information / documents /
demonstration related to any Decision Support Tool / Algorithm at any time as it may deem fit.
Signed sealed and delivered by the Authorised representative of the MEMBER.
Authorised Signatory Name
Stamp of the Trading Member
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Annexure A1
NOTWITHSTANDING the generality of the above, the software provided complies with the followingprovisions in particular as directed by SEBI / NSE.
S No. Requirement Whether complied (Yes / No)
1 The software provides for routing of orders through
electronic / automated risk management systems of the
broker to carry out appropriate validations of all risk
parameters before released to the Exchange tradingsystem including
Individual Order Level:
• Quantity Limits check
• Price Range checks
• Trade price protection checks
• Order value checks
Client Level:
• Net position v/s available margins
• RBI violation checks for FII restrictedstocks
• MWPL violation checks
• Position limit checks
• Trading limit checks
• Exposure limit checks at individual clientlevel and at overall level for all clients
YES / NO
2 The system has Provision for generating and maintaining
complete Audit Trail.
YES / NO
3 The orders generated by Decision Support Tools /
Algorithmic trading products are identified as ‘Algorithmorders’ while releasing to the Exchange
YES / NO
4 All orders generated by Decision Support Tools /
Algorithmic trading products are offered to the market for
matching and no cross trades are generated
YES / NO
5 The system has sufficient security features including
password protection for the user ID, automatic expiry of passwords as the end of a reasonable duration and
reinitialisation of access on entering fresh passwords
YES / NO
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Annexure B
Application form for identification of Decision Support Tools / Algorithms trading as ‘Approved
Algorithms’(To be executed on letterhead of the Vendor)
I / We ______________________________________, an individual / a firm registered under theIndian Partnership Act, 1932 / a Company / Body Corporate incorporated under the Companies Act of
1956/ __________________________ Act, ___, and residing at / having our registered office at
_____________________________________________.
We are desirous of making available Decision Support Tools/Algorithms to trading members of the
Exchange in Capital Markets/ Future & Options Segments/ Currency Derivative Segments for the
purpose of Algorithmic Trading; hereby apply for the permission of the Exchange for identification of Decision Support Tools / Algorithms trading as ‘Approved Algorithm’
S
No.
Particulars Details
1 Name of the Software Vendor
2 Registered Office/ Office address :
Telephone :
Fax No. :
3 Name of the Authorised Signatory and
Designation
4 Contact address of the AuthorisedSignatory :
Telephone No. :
Fax No. :
5 Strategy Name and Version number
6 Type of algorithm • Execution Algorithm
• Arbitrage Algorithm
• Alpha seeking Algorithm
• High Frequency Trading
• Others
7 Whether CTCL / adapter and automated risk
management system using which the Decision
Support Tools / Algorithmic trading product shallconnect to the Exchange Trading system is
developed by the vendor on his own
YES / NO
8 If not, name of vendor who has developed CTCL /
adapter automated risk management system towhich the Decision Support Tools / Algorithmictrading product is integrated
Signature of Authorized Signatory of the Vendor
Name of the Vendor
Date :
Place:
Stamp/Seal :
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Annexure B1
NOTWITHSTANDING the generality of the above, the software provided complies with the followingprovisions in particular as directed by SEBI / NSE.
S No. Requirement Whether complied (Yes / No)
1 The software provides for routing of orders through
electronic / automated risk management systems of the
broker to carry out appropriate validations of all risk
parameters before released to the Exchange tradingsystem including
Individual Order Level:
• Quantity Limits check
• Price Range checks
• Trade price protection checks
• Order value checks
Client Level:
• Net position v/s available margins
• RBI violation checks for FII restrictedstocks
• MWPL violation checks
• Position limit checks
• Trading limit checks
• Exposure limit checks at individual clientlevel and at overall level for all clients
YES / NO
2 The system has Provision for generating and maintaining
complete Audit Trail.
YES / NO
3 The orders generated by Decision Support Tools /
Algorithmic trading products are identified as ‘Algorithmorders’ while releasing to the Exchange
YES / NO
4 All orders generated by Decision Support Tools /
Algorithmic trading products are offered to the market for
matching and no cross trades are generated
YES / NO
5 The system has sufficient security features including
password protection for the user ID, automatic expiry of passwords as the end of a reasonable duration and
reinitialisation of access on entering fresh passwords
YES / NO